GF SEC: In the aviation industry, the passenger load factor in the first quarter of 2026 was impressive. The demand in April continued to show resilience, while the supply was marginally tightening.

GF Securities released a research report stating that in the first quarter, the supply and demand of the three major airlines increased by 7.4%/10.3% year-on-year, and the passenger load factor increased by 2.3 percentage points to 85.5%, which is 3.1 percentage points higher than in 2019. Ticket prices increased year-on-year, and the pre-sale data for the May Day holiday was impressive. Against the backdrop of high oil prices, airlines actively reduced inefficient capacity, leading to a marginal contraction in supply, and improving the industry's competitive landscape. Overall, demand remains resilient, holiday demand is high, coupled with capacity contraction, marginal improvement in supply and demand in the industry, and ticket prices are on the rise. Since the adjustment of oil prices following the US-Iran conflict in March, stock prices and valuations have been at relatively low levels, and attention should be paid to opportunities for contrarian investment. GF Securities' main views are as follows: In March, the industry's demand growth exceeded the growth in supply, the passenger load factor reached a high level, with the growth mainly driven by domestic routes and a widening gap in supply and demand for international routes. According to the operating data announcement of six listed airlines in March, the total supply and demand of the six listed airlines increased by 10.8%/15.9% year-on-year in March. The passenger load factor increased by 3.8 percentage points to 86.9%. Looking at different routes, domestic routes saw a supply and demand increase of 11.4%/13.5% year-on-year, with the passenger load factor increasing by 1.6 percentage points to 86.4%. International routes saw a supply and demand increase of 9.5%/22.3%, with the passenger load factor increasing by 9.3 percentage points to 88.6%. Regional routes saw a supply increase of 7.5% and a demand increase of 15.5%, with the passenger load factor increasing by 5.6 percentage points to 81.2%. There was differentiated performance in the first quarter, with Air China showing impressive growth, and the passenger load factors of the three major airlines exceeding the levels of 2019. According to the operating data of the three major airlines in the first quarter, the supply and demand of the three major airlines increased by 7.4%/10.3% year-on-year in the first quarter, and the passenger load factor increased by 2.3 percentage points to 85.5%. In the first quarter, Air China's supply and demand increased by 7.6%/13.7% year-on-year, and the domestic/international passenger load factors increased by 3.5/7.2 percentage points to 85.6%/83.6%. In the first quarter, the overall passenger load factors of Air China, China Eastern Airlines, and China Southern Airlines increased by 3.0/2.2/4.2 percentage points compared to 2019 levels. According to the operating data of private airlines in the first quarter, the supply and demand of Spring Airlines, Juneyao Airlines, and Hainan Airlines increased by 4.5%/7.5% year-on-year, with domestic routes seeing a supply and demand growth speed of 6.3%/8.0%, and international routes seeing changes of -1.4%/+5.5%. Looking at individual airlines, Juneyao Airlines' total supply and demand recovered to 147.2%/149.7% of 2019 levels, and Spring Airlines' total supply and demand recovered to 166.5%/167.4% of 2019 levels. Ticket prices increased year-on-year, and the pre-sale data for the May Day holiday was impressive, leading to airlines voluntarily reducing inefficient capacity under high oil prices, driving marginal contraction in supply, and continuous improvement in the industry's competitive landscape. According to data from the Civil Aviation Administration, the number of canceled domestic flights during the transition period of the 2026 summer and autumn flight season (March 30 to April 13) increased by 15.81% compared to the same period in 2025. In terms of prices, the average economy class ticket price in March was 688.1 yuan, a 5.3% increase from 2025; the pre-sale ticket price for economy class during the May Day holiday was 979 yuan, a 9.6% increase from 2025, and a 24.2% increase from the same period in 2019. At the same time, the fuel surcharge has been increased, with domestic routes below 800 kilometers/above 800 kilometers increased to 60 yuan/120 yuan starting from April 5. Overall, demand remains resilient, holiday demand is high, coupled with capacity contraction, improvement in the industry's marginal supply and demand, and rising ticket prices. Since the adjustment of oil prices following the US-Iran conflict in March, stock prices and valuations have been at relatively low levels, and attention should be paid to opportunities for contrarian investment. Preferred stocks include Air China, Spring Airlines, Juneyao Airlines, Hainan Airlines Holding, and China Express Airlines. Risk warning: Uncertainty in tariff policies, economic downturn, safety accidents, and sharp increase in oil prices.